Day of crisis

What with all the conflicting news reports, it’s hard to tell what’s really going on with the global financial crisis. Michelle Starr talks to three men on the front line.

Garfish’s Mark Scanlan doesn’t like the word ‘crisis’. “Everyone’s using it, but I think that’s part of the problem,” he says. “It’s scaremongering. Whenever I hear that word, I think, ‘Gosh, here we go again’.”

He’s not denying that there’s something going on; but he prefers to refer to it as a ‘blip’.

However you want to label it, restaurants and caterers Australia-wide are feeling a pinch.A Newspoll survey conducted on behalf of American Express in October revealed that 65 per cent of restaurateurs feel the crisis is a major concern. RCQ President Peter Summers, though, paints a slightly different picture. “As an industry, we’ve been doing it quite tough for most of [last] year,” he says. “I think we’ve already been through a lot more than the other industries have.”

Teage Ezard, proprietor of Melbourne’s Ezard and Gingerboy, agrees. “For us, it started around May,” he says. “It’s something that’s been around for a little while. It’s starting to worsen as we get to the business end of the season.”

It’s difficult to tell exactly how establishments will be affected. For Ezard, it was the lunch trade. “Dinners are always very strong, but we noticed that the lunch trade and the corporate market weren’t coming in as much,” he says. “It’s sort of ebbed and flowed. It hasn’t been dramatic, but it has been noticeable. On the other side of the coin, Gingerboy is going gangbusters. And, it’s funny to say, we’re selling more degustations than ever before at Ezard.”

On reason for this might be that consumers are not spending less so much as spending smarter. The fine dining market is trading down to mid-range dining, and consumers are seeking out better value for money.

Scanlan agrees with this trend. “We are noticing changes in customer spending patterns,” he says. “For example, they’re drinking less wine. My staff report that it’s harder to up-sell. So less things like wine and coffee and dessert and that extra side or bottle of mineral water.”

Positioned in an affluent area, Scanlan admits his three Garfish restaurants have been buffered from the full effects of the crisis as experienced by other venues. “We’re not growing,” he says. “We’re not meeting our anticipated budget growth, but we’re not seeing the full effect that has been reported for the September quarter.

“When this news broke, up to that point we were traveling quite nicely and still growing. Then, when this whole thing burst onto the world front page, I think it scared a lot of people; they are reigning in their disposable dollar spend. We’re not going backward, but we’re not going forward; if anything, we’re just sort of tracking sideways.”

Add to the mix rising food costs. Over the past three years, the cost of food globally has doubled. Australia hasn’t been hit as hard as some other areas of the world, but the rise in the cost of supplies has definitely been noticeable. “Expenses keep going up,” says Scanlan. “Even basic things that we need to sustain our business.”

However, all this does not necessarily mean the forecast is dire. “I don’t think the same rate of decline will continue,” says Summers. “I think we’ll probably plateau. Everyone’s talking about job losses. I don’t think that’s going to happen to our industry—we’ve been doing it tough already. If it wasn’t fuel, it was interest rates; forget the stock market thing, fuel and interest rates really impacted on the way people were spending.”

In other words, Summers believes that, because the food service industry has already faced the tough times that are now starting to afflict other industries, it doesn’t have as far to go before it evens out. He also hopes that, now that the Australian dollar is weaker on the global scale, tourism will start to pick up. “It’s cheaper to come to Australia now,” he says. “Maybe international tourism will pick up.” We are also, he
says, starting to see lower fuel prices; perhaps that will make it easier for Australians to travel within Australia.

These are all maybes, though. As nice as it would be if the tourism market reignited the industry, one shouldn’t rely on that possibility to revive a flagging business. It’s important to have survival strategies in place.

For Ezard, these take the form of being aware of exactly how his businesses are traveling. “We have internal management meetings every week, and monthly meetings with our accountants,” he says. “We’re constantly meeting to determine where we need to cut costs.”

Through constant review of profit/loss statements, key performance indicators, and sales and percentages figures, the Ezard and Gingerboy teams
are constantly reviewing budgets, comparing them to forecasts and adjusting how to proceed accordingly.

“When you have a slight decrease, casual hours are the first thing to look at when reducing costs; then other non-essential items, like traveling and staff parties,” Ezard says.

Scanlan follows a similar strategy—when he can. “It’s difficult,” he says, “because business is a bit sporadic; and, being a labour-intensive industry, we still have to have the staff there in anticipation of a busy service. When it’s not busy, the casuals are the first to go. Rostering has become paramount.”

But there is, he believes, one key method of maintaining clientele. “Consistency. That’s what customers are looking for. They’ll return to your business if they know they’re going to get a consistent level of food and service,” he says. “And, although attracting new customers is important, retaining your existing clientele and making them return to you is paramount.

“If you have a good restaurant, it’ll always be fairly busy. This little blip will weed out the poor operators from the better operators. It’ll probably be good for our industry.”

However, Summers believes this mindset counter-productive. If the industry is to survive with minimum casualties, he believes proprietors are going to have to work together. “If there was ever a time in our industry that we needed to work closely with one another, this is it,” he says. “For the most part, we feed off each other. A restaurant strip is successful because it has more than one restaurant; so it’s in everyone’s interest in that precinct that everyone else is doing well.”

This may involve sharing problems; for example, if one establishment is having problems with a supplier, perhaps others are also. Sharing the problem might make it easier to do something about.

Summers hopes, though, that working together will occur on a much larger scale. “Recently, the automotive industry received a bailout package,” he says. “They were saying that every million dollars spent in their sector equals eight jobs. Well, every million spent in our industry equals 15 jobs. That’s almost double the number of jobs for the same number of dollars spent. We need to have that recognised for our industry, to protect it from harm.”

It can’t hurt, he says, to get to know the restaurateur next door, to sit down and have a cup of coffee and discuss mutual problems—whether they be a supplier with exorbitant costs or the effect of the fringe benefits tax on business meals. “It’s better to work as a collective group of people,” he says. “We’re talking about lobbying against Industrial Relations law. As one owner, you have no chance. As 20,000, you do.

“Every restaurateur should know that the government bailed out the automative industry, but it’s not doing anything for us. Then they can get more involved. We need more of a voice out there.” ≤

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